If your company is trying to figure out which e-commerce site to emulate as it builds out its own, you might want to steer your team away from copying Netflix's strategy. That's because the online "renter" of DVDs and streaming video content took a step backwards this year during the critical holiday shopping season, according to the results of analytics firm ForeSee's latest Holiday E-Retail Satisfaction Index.
The annual report, now in its seventh year, measures a rather broad metric: customer satisfaction with a site's content, functionality, merchandise and pricing. Netflix really got dinged on that last metric, which bounced it considerably down the list of top e-tailers. That is notable because Netflix has been vying with Amazon for first place on the Index since it was first published. Foresee excludes eBay because of its business model and large volume of transactions. The ForeSee is based on 8,500 surveys of visitors to the top 40 e-tail sites, based on sales revenue reported in Internet Retailer's Top 500 Guide. A snapshot of the index average appears in the infographic below.
The index, which is based on a 100-point scale, was led by Amazon, which rose 2 points to 88. That is the highest score reported by Foresee so far. Netflix skidded 8 percentage points to 79. Strictly speaking it should be happy with that score, because it is at least average. But this doesn't bode well for Netflix as Amazon prepares to take on the site directly with its own streaming video and rental services.
Gap.com and Overstock.com also logged big decreases during the latest holiday season, according to the ForeSee research. Meanwhile, JC Penney and TigerDirect.com posted the biggest increases in customer satisfaction.
Commenting on the research, ForeSee President and CEO Larry Freed said:
"Netflix totally misread its customer base and is paying the price, damaging its brand among both consumers and investors. Raising prices by 60 percent and splitting the baby into separate DVD and streaming services totally undermines Netflix's cost and convenience advantages. Customers satisfaction is predictive, which means that Netflix's financial woes may just be the beginning."
I spent some time scouring the index to see what companies are doing the best and was intrigued to see that with the exception of Amazon.com, the top 5 best-performing e-tail sites on the list were all run by companies that have multiple sales channels. After Amazon.com, the next four sites were: Avon.com, JCP.com (JC Penney), QVC.com, and Store.Apple.com.
E-commerce sales are an increasingly important part of any retailer's sales mix. Consider that during the just-ended holiday shopping season, Internet business metrics firm comScore reported that $35.3 billion was spent online. That was up 15 percent from the same period during 2010. There were nine days during the holiday shopping season when daily sales topped $1 billion.
Now, here's the clincher, as of the end of the third quarter, e-commerce accounted for just 4.2 percent of total retail sales, according to the U.S. Census Department. To say that there is an enormous upside for companies making the right investments online would be grossly understating things. I'm not suggesting that all retail will move online, but the U.S. retail industry reaching a tipping point late in 2011.
The emergence of mobile shopping applications, the accelerating consumer penetration of e-readers and media tablets, and the insatiable American desire for convenience and a really good deal are all factors. Those retailers and consumer companies hoping to capitalize in the coming months would do well to peek at ForeSee's ranking and see what companies appear to be doing things right, and which are not.
(Infographic courtesy of ForeSee)